As the cryptocurrency landscape evolves, the world’s largest digital currency, Bitcoin, faces the potential risk of a supply shock due to the skyrocketing demand from United States (US) Spot Bitcoin Exchange Traded Funds (ETFs). This growing interest has surpassed all expectations, with the volume of Bitcoin acquired through these ETFs in December 2024 more than tripling the amount mined during the same period. This imbalance between supply and demand highlights a crucial issue that could have far-reaching implications.
Spot Bitcoin ETFs Could Trigger a Significant Supply Shock
In an astonishing turn of events, US Spot Bitcoin ETFs purchased an impressive 51,500 BTC in December 2024. In stark contrast, Bitcoin miners were only able to produce 13,850 BTC during the same month, according to data available from Blockchain.com. This discrepancy underscores the fact that Bitcoin ETFs alone acquired nearly four times the amount of BTC that miners were able to generate and introduce to the market.
Unprecedented Demand and Potential Consequences
Reports indicate that the demand for Spot Bitcoin ETFs in December was extraordinary, exceeding the available supply by around 272%. This surge in demand has raised alarms about a potential Bitcoin supply shock, with analysts warning that such an event could occur in the near future. Crypto analyst Lark Davis announced earlier in December that “a massive supply shock is imminent,” basing his prediction on the substantial accumulation of Bitcoin by US Spot Bitcoin ETFs. At one point in December, these ETFs purchased 21,423 BTC, while miners produced only 3,150 BTC.
Global Holdings and Future Projections
Davis also highlighted that, as of December 17, 2024, Bitcoin ETFs globally held approximately 1,311,579 BTC, valued at $139 billion. This accounts for 6.24% of Bitcoin’s total supply of 19.8 million. Given this significant figure, Davis projects that during peak bull market phases, Spot Bitcoin ETFs could potentially hold 10-20% of Bitcoin’s total supply, amplifying concerns about a major supply shock.
Analyzing the Concentration of Spot Bitcoin Inflows
Data from Glassnode revealed that Spot Bitcoin ETFs recorded a total net inflow of $4.63 billion in December, nearly doubling their 2024 monthly average of $2.77 billion. Notably, the surge in Spot Bitcoin ETF inflows was more concentrated in the first half of the month. The second half saw outflows, with December 26 being a notable exception.
Correlation with Bitcoin Price Movements
The timing of this surge and subsequent decline in Bitcoin ETF inflows aligns with the cryptocurrency’s price movements in December. Early in the month, Bitcoin experienced a significant upward momentum, hitting a new all-time high above $108,000 on December 17, driven by bullish market sentiment and increased demand. However, following this peak, Bitcoin’s price saw a sharp decline, coinciding with significant outflows from Spot Bitcoin ETFs, as reported by Glassnode.
Continuing Trends into the New Year
Despite the December demand surge for Spot Bitcoin ETFs, new data indicates that investors have extended their accumulation trend into January 2025. On January 3, investors bought over $900 million worth of Bitcoin through Spot Bitcoin ETFs. More recently, US Spot Bitcoin ETFs acquired an additional 9,500 BTC, valued at over $966 million at the current market price.
